Dividends
Companies that pay cash dividends, one indication of strong free cash flow, have historically outperformed the broader market. But focusing strictly on dividend payments, however, misses two key indicators of strong free cash flow: net share repurchases and net debt paydown.
Net Share Repurchases
Share repurchases are when a company buys back its own shares. Like dividends, it is another method for companies to return profits to shareholders. But because companies can also issue additional shares, it's important to consider net share repurchases, which consider share issuance as well.
Net Debt Reduction
Looking at net debt reduction helps identify companies that are paying down debt, and it helps avoid companies borrowing money to buy back shares.
